Editor's Letter

Growing Despite the Economy

November 2010

by Jim Gordon

It’s difficult for vintners and growers to be optimistic about the wine economy today with all the bad news circulating, at least on the West Coast. Yet positive signs are there for the discovering, and we’ve found a few powerful ones for this issue.

First, the bad news: In mid-October grape prices were down in California, and a lot of fruit was still hanging. A peculiarly cool growing season and the onset of early rains meant numerous challenges, which included very late ripening and significant mildew and bunch rot problems in some locations. On-premise sales remained depressed two years after the banking crisis, and consumers appeared to be chasing bargains as they have for the past two years.

A pessimistic mood prevailed at the annual Wine Industry Financial Symposium in late September, as bankers, winery owners and their CFOs wondered if the wine economy would ever return to “normal.” Covering the symposium for Wines & Vines, Paul Franson observed that attendees laughed at the news that government economists determined the recession officially ended in July 2009. We also have reported on numerous wineries being sold in distress or going bankrupt.

Concrete indicatorsBut Wines & Vines has observed the wine industry’s ups and downs for 91 years, and this editor has experienced and reported on wine recessions for the past 30 of those. Do remember that it’s always darkest before the dawn (pick your own favorite cliché for this topic), and that things will indeed get better. In fact, they are getting better right now according to several metrics.

Our cover story by Kate Lavin shows that industry suppliers are either the most optimistic people we’ve ever met, or they have reason to believe that business is growing. In the third annual Wines & Vines supplier survey, 66% said their businesses grew during the 12 months previous. Further, 73% expect the wine industry to expand (though most said slowly) during the next 12 months.

True, the survey didn’t measure industry performance directly, but elsewhere in this issue we have more concrete metrics. We’ve added a new data page, the Wine Industry Data Center, to the Headlines section of the magazine that will provide readers with a snapshot of wine’s financial health in every issue. We plan to chart off-premise sales, direct-to-consumer (DtC) shipments and wine industry employment each month in the same place for you to grasp at a glance. We will also add other interesting economic details as they arise.

The Wine Industry Data Center this month shows that retail wine sales are beating 2009 by a healthy margin; DtC shipments are up even more dramatically, and more wine companies are looking to hire new employees. The off-premise sales data stems from our collaboration that began early this year with the Symphony IRI Group, which tallies check stand data every four weeks at major food, drug, liquor and convenience stores.

Our data on DtC sales is the fruit of a partnership with ShipCompliant, in which Wines & Vines runs millions of actual DtC transactions through a model using our WinesVinesDATA to accurately characterize (without revealing brand names) the dollar sales, number and types of shipments, varietals sold, size of wineries shipping, top destination states and many more details. DtC shipments for September grew 15% over September 2009.

The employment data comes from Winejobs.com, the wine industry’s leading online job site. The Winejobs.com index reflects the health of industry sectors by charting changes in the number of job postings for production, sales and marketing, and hospitality jobs. The index indicates that job postings by wineries in September 2010 increased 31% over September 2009.

Points of positivityThree points of positive news like those are hard to dismiss. Your wine business may well be in pain, more sales of distressed properties may well occur, restaurant goers may never return to their uninhibited spending of the mid-2000s. But that doesn’t mean that some things aren’t changing for the better this season—nor that your grape or wine business can’t take advantage of the positive trends.

We’d love to hear about your successes in these tough times and share them with other readers in coming issues of Wines & Vines. Please e-mail or call me (jim@winesandvines.com, (415) 453-9700) if you have good news to report or winning strategies to offer your peers.